Japanese stocks surged again! The Fed's rate cut boosts sentiment, and Asian stock markets are poised for action

After the Federal Reserve cut interest rates by 50 basis points and indicated further policy easing in the coming months, Asian stock markets rose in sync with European and American stock futures on Thursday.

As of the time of writing, the Nikkei 225 Index expanded its gains to 2%; the Australian S&P/ASX200 Index opened up by 0.3%, reaching 8169.40 points at one point, continuing to hit historical highs; European Euro Stoxx 50 Index futures rose by 0.68%, UK FTSE 100 Index futures rose by 0.54%, Germany's DAX Index futures rose by 0.54%; S&P 500 Index futures rose by 0.85%, Nasdaq futures rose by 1.3%, and Dow futures rose by 0.51%.

Manish Bhargava, CEO of Straits Investment Management, said, "The rate cut in the United States may boost risk appetite in Asian stock markets, driving capital inflows into emerging markets as investors seek higher returns. The initial stage of the Fed's normalization cycle is firmer than expected as it readjusts policy focus to address labor market conditions."

Analysts suggest that the Fed's decision to cut the benchmark interest rate by 50 basis points is likely to benefit Asian stock markets as it provides central banks in the region with more room for policy easing.

Gary Dugan, CEO of Dalma Capital, mentioned that the rate cut will alleviate pressure from tight monetary policies and ease concerns about local currency weakness. Brad Bechtel, Global Head of FX at Jefferies, stated that this outcome is favorable for risk assets and high-yielding currencies, but the Asian forex movements may be restrained due to the renminbi acting as an anchor.

Here are more comments from analysts:

Gary Dugan, CEO of Dalma Capital:

"Asian markets should view the Fed's actions positively. It eases pressure from tight monetary policies, and with the potential softening of the US dollar, Asian central banks can loosen monetary policies without worrying about weakening their own currencies. We expect rate-sensitive stocks (such as financials and real estate investment trusts) to further strengthen. We also anticipate good performance from domestic consumer stocks as consumer confidence is expected to strengthen. Borrowing costs have been high and should now come down."

Chamath De Silva, Fixed Income Director at BetaShares Holdings:

"In reality, no one really knows. If Asian stock markets do not change much by the close, I wouldn't be surprised to wait for further clues from the US market's reaction tonight. In some ways, this is a typical market response to the beginning of an easing cycle: steeper curves, slightly higher breakevens, but it also aligns with hawkish surprises in other markets: gold weakens, the belly of the curve and long-end yields rise, and the dollar strengthens." Brad Bechtel, Global Forex Director at Jefferies:

"After the Fed meeting, the price movement is a mild position unwinding, which may lead to more USD buying in Asia, especially against the Japanese Yen, Korean Won, and Chinese Renminbi. Traders may take profits after rebounds in the Indonesian Rupiah, Malaysian Ringgit, and Thai Baht. This is favorable for risk, meaning it is beneficial for high beta currencies, which are usually currencies with higher real interest rates. However, I expect the Asian forex market to not have a significant reaction, as the Renminbi will more or less act as an anchor."

Brendan McKenna, Emerging Markets Strategist at Commonwealth Bank:

"The Asian forex market will struggle to find direction and may see some profit-taking after recent rebounds. If data points to a 25 basis point rate cut from now, the USD will strengthen. For the Asian forex market to continue its rebound, the Fed may need to cut rates by another 50 basis points. As of now, today itself has not provided much direction for the Asian forex market or even broader markets."

Satria Sambijantoro, Head of Research at PT Bahana Sekuritas:

"The dovish rate cut actually provides appreciation momentum for emerging market currencies, and so far, the rate cut has not been interpreted as a pessimistic view of the U.S. economy. We expect that foreign inflows into ASEAN and Indonesia will continue to grow, with Indonesia currently in the 'golden girl zone' of GDP recovery, relatively high credit expansion, and pre-emptively loose monetary policy."

Kristina Clifton, Senior Currency Strategist at Commonwealth Bank of Australia:

"Due to the risks of rising employment data and unemployment rates, the exchange rates of the Australian Dollar against the US Dollar and New Zealand Dollar may fall during the Asian session. If the unemployment rate rises to 4.3%, market expectations for the Reserve Bank of Australia to cut the cash rate by 25 basis points before the end of the year may increase, possibly moving from December to November."